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The great British housing crisis: where has affordability deteriorated most?

The latest instalment of our weekly series, in which we use the Centre for Cities’ data tools to crunch some of the numbers on Britain’s cities. 

Britain is in the midst of a housing crisis. Homes in London, Oxford and Cambridge have grown eye-wateringly expensive. Things aren’t much better in most of the rest of the south, and the only reason prices don’t look ridiculous in the rest of the country is because we keep comparing it to the south east.

All this, you probably know already. (And if you don’t, hi! Enjoy your first visit to CityMetric!) But how have things changed over time? Where have things deteriorated most?

One way of measuring how ridiculous house prices are is to look at the “affordability ratio”: the multiple of the average income in a city required to buy the average home. Banks, after all, tend to limit the size of mortgages to four or five times the borrowers’ income – so an affordability ratio in double figures is clearly bad news for the vast majority.

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Here’s a graph of how those ratios changed in 62 British cities between 2004 and 2015. It’s massively over-crowded (seriously, look at it), but it should at least give you a general sense of the trend. It’s also interactive: hover over a dot for more info:

The general trend in most cities has been up, with a brief dip during the credit crunch. But that trend is clearly most pronounced in more expensive cities: prices in cheaper cities have been relatively stable. And few cities seems to have significantly shifted position in their league tables: pricy cities have stayed pricy.

All of which is all pretty much what you’d expect in a country where the highly-paid jobs are increasingly focused in a small number of cities, most of which aren’t building enough housing.

That graph is a bit much though, so let’s slim it down. Let’s look at cities where affordability has declined most.

(A quick note on methodology, which you’re welcome to skip. I’m using the change in the affordability ratios – essentially, subtracting the 2004 figure from the 2014 one – rather than the ratio between them. “Prices have increased by four times the average wave” feels like a more meaningful result than “the affordability ratio has doubled”.)

Here are the 10 cities where affordability has declined by the biggest multiple of the average local wage.

Click to expand.

That’s a fairly predictable list of cities to anyone who follows Britain’s housing debate. The vast majority of those places are within London’s orbit. The obvious implication is that house prices in the capital are having a knock on effect: commuters are pushing up prices for everyone, whether they commute into London and earn the big bucks or not.

The one exception to that trend is Aberdeen, which is about as far from London as you can get in Britain. The increase in prices there has almost certainly been fuelled by the city’s 40 year transformation from economic backwater to capital of the North Sea oil industry.

Something else worth-noting about this map. Oxford is, by affordability ratio, the least affordable city in the UK. But that’s been true for more than a decade: my suspicion is that its very tight green belt, rendering growth all but impossible, is to blame.

In 2004, though, Oxford was substantially less affordable than London or Cambridge. Both have since caught up.

What about the other end of the graph? Of the 62 cities in the Centre for Cities’ database, only 16 saw their affordability ratio improve between 2004 and 2015.

In half of those, the improvement was by less than 0.1 (meaning, the average house price has improved by less than 10 per cent of the average wage). Here are those eight cities:

Click to expand.

It’d be wrong to say that housing affordability has been flat: it hasn’t, and if we started or ended the data at different points we’d get different results. But we can say it hasn’t improved very much.

Lastly, here are the eight cities where – statistical fluke or not – housing affordability was a bit better in 2015 than in 2004. In some of these cities, there does actually seem to be a slight downward trend:

Click to expand.

Only two cities have seen their housing affordability ratio fall by more than 0.3. In Sunderland, it’s fallen by 0.5; in Nottingham, by 0.53.

This is the second time recently Nottingham has been an outlier. In an earlier instalment of this series, I noted:

Why Nottingham and Leeds should have sustained their populations when most similarly sized British cities didn’t is quite frankly a mystery to me. Leeds, one can speculate, was helped out by having one of the north’s more diversified (and richer) economies; the same can’t be said of Nottingham, though.

So – Nottingham has sustained its population, when most large English cities outside the south have not; and, at the same time, its housing has become slightly more affordable.

There’s clearly some key piece of information I’m missing here about the economics and demographics of Nottingham. If anyone out there has it, please do let me know.

Jonn Elledge is the editor of CityMetric. He is on Twitter, far too much, as @jonnelledge.

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